Subject category:
Finance, Accounting and Control
Published by:
Asia Case Research Centre, The University of Hong Kong
Length: 18 pages
Data source: Published sources
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Abstract
In May 1997, Beijing Enterprises Holdings Limited, a Chinese Mainland company, incorporated in Hong Kong, was in the process of raising funds for expansion of several of its subsidiaries through Initial Public Offering (IPO). It had also decided to list in the Hong Kong Stock Exchange on 29 May 1997, thereby joining the select band of the Red Chips! Red Chip companies had had a record of major successes in raising funds through IPO, the latest being GZI Transport, a Guangzhou based Red Chip, which had its IPO oversubscribed 528.48 times! The case investigates the reasons for the ravenous investor appetite for Red Chip shares and the intricacies involved in pricing Initial Public Offerings. This case serves as a useful vehicle for students to: (1) gain exposure to China and its political, economic and legal environment; (2) learn about Red Chip shares and H shares; (3) gain an insight into the process of fund raising by Mainland Chinese firms in the global capital market; and (4) exercise valuation skills and learn to integrate capital-market assessments into the pricing of a Red Chip IPO.
Subject category:
Finance, Accounting and Control
Published by:
Asia Case Research Centre, The University of Hong Kong
Length: 13 pages
Data source: Published sources
About
Abstract
In May 1997, Beijing Enterprises Holdings Limited, a Chinese Mainland company, incorporated in Hong Kong, was in the process of raising funds for expansion of several of its subsidiaries through Initial Public Offering (IPO). It had also decided to list in the Hong Kong Stock Exchange on 29 May 1997, thereby joining the select band of the Red Chips! Red Chip companies had had a record of major successes in raising funds through IPO, the latest being GZI Transport, a Guangzhou based Red Chip, which had its IPO oversubscribed 528.48 times! The case investigates the reasons for the ravenous investor appetite for Red Chip shares and the intricacies involved in pricing Initial Public Offerings. This case serves as a useful vehicle for students to: (1) gain exposure to China and its political, economic and legal environment; (2) learn about Red Chip shares and H shares; (3) gain an insight into the process of fund raising by Mainland Chinese firms in the global capital market; and (4) exercise valuation skills and learn to integrate capital-market assessments into the pricing of a Red Chip IPO.
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Subject category:
Finance, Accounting and Control
Published by:
Asia Case Research Centre, The University of Hong Kong
Length: 13 pages
Data source: Published sources